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Wednesday, September 14, 2011

Good answers come from Good Questions

People have busy lives and even when they find the time to skim the news of the day, they are bombarded with empty or distorted headlines.  Sometimes truth tends to be buried in the fine print.  But other times, you find even more distorted logic.  To find the right answers, you gotta know to ask the right questions. Found a good example of this in an AP article today regarding consumer spending in August:

"U.S. consumers grew more cautious last month amid wild stock market swings, zero job growth and heightened concerns that the economy has weakened.  Retail sales were flat in August. At the same time, wholesale inflation leveled off.  The latest data could give the Federal Reserve more impetus to adopt additional stimulus next week. "The combination of those two reports sets the stage for, and warrants, additional action by the Fed," said Michelle Meyer, an economist at Bank of America Merrill Lynch. Wall Street looked past the weak retail sales data. Growing optimism that European leaders would be able to contain their debt crisis drove stocks higher. The Dow Jones industrial average closed up 140 points for the day."

Some basic questions popped into mind:

1)  If consumer spending is down and its serious, then how is it time and time again, the stock market brushes it off, like dandruff off a shoulder?  If wall st is willing to "look past" retail sales data, stagnant jobs, etc, what does it take seriously-- besides more blood money i.e. stimulus?

2)  If the market gets their precious stimulus (essentially QE3 or another clever name for it), will that do anything to jumpstart the economy and jobgrowth that the first two QE failed to do?

3)  The quote comes from someone working at Bank America-- isn't that the Failure of a financial institution so badly run, its stock has dropped 50% and now will lay off 30-40,000 people?

4)  What was this "optimism" that Investors had concerning this 2+ year and counting European debt crisis?  A political leader's speech?  A promise not to default?

Funny how much information one can take from a pretty worthless AP article, if knowing the right questions to ask...

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